Harper orders Mulroney probe

OTTAWA, TORONTO  Stephen Harper moved to protect the integrity of the office of prime minister yesterday as he announced that a yet-unnamed neutral adviser will look at Brian Mulroney's cash dealings with a lobbyist and decide whether they warrant a public inquiry.

The Prime Minister dropped his late-afternoon bombshell after government lawyers met to discuss unproven allegations revealed in a sworn affidavit that Karlheinz Schreiber tabled in court two days ago and The Globe and Mail published yesterday.

Mr. Harper had offered his full support to Mr. Mulroney a week ago, but changed course after Mr. Schreiber claimed he and Mr. Mulroney made plans for a $300,000 deal while the latter was still prime minister in 1993. Mr. Harper also expressed surprise that there was a passing reference to his own name in the affidavit.

He said his priority is to protect the prime ministerial office, and ordered Conservatives to distance themselves from Mr. Mulroney for now.

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"I have not discussed this course of action with Mr. Mulroney, and I think it will be incumbent upon myself and also upon members of the government not to have dealings with Mr. Mulroney until this issue is resolved," Mr. Harper said.

"The allegations do touch upon Mr. Mulroney's term of office, which is why we believe we can't ignore the allegation, from the perspective that I think that we always must protect the office of the prime minister," he said.

In a statement released last night, Mr. Mulroney said: "I acknowledge the appointment of an independent and impartial third party to review the allegations. I will cooperate fully with the person appointed."

The announcement - which could affect the $2.1-million settlement obtained by Mr. Mulroney from Ottawa in 1997 - came exactly one week after Mr. Harper strongly rejected opposition calls for a public inquiry.

Mr. Harper explained that after government lawyers looked at Mr. Schreiber's affidavit yesterday, he felt he needed outside advice.

"This affair has been the subject of all kinds of rumours and innuendo over the years, and I think for that reason it's impossible, frankly, for the government to make an impartial judgment on how to proceed," he said.

The affair - which has long pitted Liberals against Conservatives - goes back to the sale of Airbus planes to Air Canada in the 1980s. After the sale, it emerged that Airbus had a secret contract with a shell company connected to Mr. Schreiber. As a result of that contract, about $20-million in secret commissions were funnelled into Swiss bank accounts controlled by Mr. Schreiber.

Mr. Schreiber has never detailed what service he provided for the commissions or where he dispersed them, except to say that one recipient was the late Frank Moores, a lobbyist and former Conservative premier of Newfoundland.

The Canadian government alleged in a letter to Swiss authorities in 1995 that Mr. Mulroney was involved in illegal activities in relation to the commissions. Mr. Mulroney sued the government for defamation when he learned of the letter, winning an apology and a $2.1-million settlement.

In the 1996 hearings that preceded the settlement, Mr. Mulroney played down his relationship with Mr. Schreiber, saying he had only had coffee once or twice with him after leaving office.

But Mr. Mulroney and Mr. Schreiber had established a financial relationship that involved more than courtesy calls, with Mr. Schreiber paying him $300,000 in three cash instalments in hotels in 1993 and 1994. Government officials have said the lawsuit would have been resolved differently had they known about the payments.

Mr. Harper said the adviser to be named in coming days will provide independent advice after looking at:

"the seriousness of the allegations as it impinges upon Mr. Mulroney's time in office"

"whether, if any of these allegations were true, they would or would not have any impact upon that settlement."

Mr. Harper said he wants to know "whether an inquiry is needed or is required or is the best route or a feasible route forward, and if so, what kind of inquiry."

Mr. Harper said the adviser will not be an investigator, but will be expected to look at public records and talk to individuals involved. The Liberals called the move insufficient.

"The Prime Minister must take decisive action now, and call a full judicial inquiry with all the independence and powers of the Inquiries Act, to allow others to get to the bottom of this in a transparent and accountable process," Liberal Leader Stéphane Dion said in a statement.

In a phone call from Toronto West Detention Centre, where Mr. Schreiber had to turn himself in more than a month ago in the buildup to his extradition hearings, the 73-year-old German-Canadian said he was elated.

"It is so amazing. I cannot tell you how happy I am," he said.

Mr. Schreiber has written letters to many members of Parliament urging for an inquiry.

"They need a good judge. A Supreme Court judge or something or two or three, but none which was appointed by Mulroney," he said.

Mr. Mulroney and Mr. Schreiber are currently facing off before the Ontario Superior Court, with Mr. Schreiber seeking to recoup the $300,000 over allegations Mr. Mulroney did not provide the promised services. Mr. Schreiber tabled an affidavit in that matter two days ago, saying he agreed to a deal on the money with Mr. Mulroney on June 23, 1993 - two days before Mr. Mulroney's official resignation.

"It was at this meeting that Mr. Mulroney and I entered into the Agreement" for Mr. Mulroney to receive the cash payments, Mr. Schreiber's affidavit states. But Mr. Mulroney's spokesman, Luc Lavoie, said the meeting was "a courtesy sort of thing."

"There was no discussion whatsoever at that meeting about any agreement of any sort," he said.

Thirty-four days after the meeting at Harrington Lake, Mr. Schreiber withdrew $100,000 from a Swiss bank account with the code name "Britan." One month later, he paid Mr. Mulroney the first instalment at a hotel near Montreal's Mirabel Airport.

In the affidavit, Mr. Schreiber also said he asked Mr. Mulroney in the summer of 2006 to deliver a letter on the Airbus affair to Mr. Harper. Mr. Harper confirmed meeting Mr. Mulroney at that time, but said they did not discuss the case or exchange a letter.

"I don't think that's important," Mr. Harper said of that allegation.

He said that when he became prime minister, he asked officials whether there was any open file on the Airbus affair, and was told there was none.

On Thursday, Mr. Schreiber's lawyer, Edward Greenspan, will appear before the Ontario Court of Appeal to argue that the evidence used by Germany to extradite Mr. Schreiber has been tainted by recent developments in Europe.

Mr. Greenspan said yesterday that if the court decides to uphold the extradition, he will apply for leave to the Supreme Court of Canada.

"Whatever happens, I doubt if Mr. Schreiber would be immediately returned to Germany," Mr. Greenspan said.

Mr. Schreiber is facing extradition to Germany over charges of fraud, bribery and tax evasion. Mr. Harper, however, said his announcement does not constitute an intervention in favour of Mr. Schreiber's fight to stay in Canada.

THE PRIME MINISTER'S STATEMENT

Federal lawyers have been reviewing the new affidavit sworn by Karlheinz Schreiber related to his dealings with Brian Mulroney before, during and after his time in office. The new allegations in the affidavit stem from a private lawsuit currently before the courts and do not involve the federal government.

Although these new allegations are unproven and untested in a court of law, they will be the subject of much public discussion and interest.

There are, however, two issues which go beyond the private interests of the parties in the lawsuit.

First, some of these new allegations touch on the former prime minister's time in office. And, second, whether these allegations, if true, have any bearing on the settlement reached in January 1997.

Under these circumstances, I'm announcing today that I will be appointing an independent and impartial third party to review what course of actions may be appropriate given Mr. Schreiber's new sworn allegations.

In the government's review of the affidavit, I was also surprised to learn that my own name was mentioned. In the affidavit, Mr. Schreiber alleges he gave a letter to Mr. Mulroney which was intended to be shown to me at a meeting at Harrington Lake in July 2006.

Let me just say my family and I did host the former prime minister and his family for a social occasion at Harrington Lake in August 2006 at our invitation. We did not discuss Mr. Mulroney's dealings with Mr. Schreiber during that visit nor did Mr. Mulroney present a letter from Mr. Schreiber. In fact, Mr. Mulroney has never spoken to me on behalf of Mr. Schreiber. Nor has he ever presented me with any documents for Mr. Schreiber.

I can assure you we will move quickly on this matter. We will begin by naming the independent third party as early as next week.

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